What Is Medicare Tax Withheld on a W-2?
The Medicare tax on your W-2 may not be your final amount. Learn how withholding is calculated and how your total income determines your final tax liability.
Medicare tax is a mandatory federal payroll deduction that funds the Hospital Insurance (Part A) portion of the Medicare program. This tax is a component of the Federal Insurance Contributions Act (FICA) taxes, and all employed individuals contribute through withholdings from their paychecks.
Locating and Understanding Medicare Tax on Your W-2
On your Form W-2, Wage and Tax Statement, your Medicare earnings and tax withholdings are in two boxes. Box 5, “Medicare wages, tips, etc.,” shows the total compensation subject to Medicare tax, including wages, bonuses, and tips. Unlike Social Security, there is no annual income limit for Medicare tax, so all of your Box 5 wages are subject to it.
Box 6, “Medicare tax withheld,” displays the total amount deducted from your pay during the year. The standard employee Medicare tax rate is 1.45%, so the amount in Box 6 should equal the Box 5 figure multiplied by 1.45%. For example, if your Box 5 wages are $60,000, your Box 6 withholding should be $870.
Your employer also pays a share of this tax. Employers are required to match their employees’ contributions by paying an additional 1.45% on the same wages. This employer portion is a business tax expense for the company and is not reflected on your W-2.
The Additional Medicare Tax for Higher Earners
Some individuals are subject to an “Additional Medicare Tax” of 0.9% on earnings that exceed specific thresholds set by the IRS. These thresholds are based on your tax filing status and apply to wages over $200,000 for Single and Head of Household filers, $250,000 for Married Filing Jointly, and $125,000 for Married Filing Separately.
An employer is obligated to start withholding the 0.9% tax only when an employee’s wages from that specific employer surpass $200,000 in a calendar year. The employer makes this determination without regard to your filing status or other income sources.
This withholding protocol can lead to situations where the correct amount of tax is not withheld during the year. For example, if your total income from multiple sources exceeds your filing status threshold, but no single employer paid you over $200,000, you may owe additional tax when you file.
Reconciling Total Medicare Tax on Your Return
To calculate your total Medicare tax liability, you must use IRS Form 8959, Additional Medicare Tax. This form is filed with your annual income tax return, such as Form 1040, to reconcile the amount of Additional Medicare Tax you owe with the amount your employer withheld.
A shortfall in withholding commonly occurs in two scenarios. The first involves married couples whose individual incomes are below $200,000 but whose combined income exceeds the $250,000 threshold. The second involves individuals who work multiple jobs, earning less than $200,000 at each, but whose total wages are over their threshold. In these cases, Form 8959 will calculate the tax owed.
Conversely, it is possible for too much Additional Medicare Tax to be withheld. This can happen if your circumstances change mid-year, such as a divorce that alters your filing status and income threshold. If more tax was withheld than you were liable for, you can claim the overpayment as a refundable credit on your tax return by filing Form 8959.